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Senator Elizabeth Warren on Tuesday called on the Federal Reserve to dissolve Wells Fargo & Co., saying the bank continues to hurt consumers.
In a letter to Fed Chairman Jerome Powell, the Massachusetts Democrat called for the scandal-ridden bank to be forced to separate its traditional consumer banking business from its investment banking business.
Warren said Wells Fargo was working to expand its investment banking, despite the asset cap imposed on it by regulators, and was carrying out “risky activities” such as lending to hedge funds, which could harm its customers.
“Wells Fargo is simply ungovernable,” she wrote, citing a litany of scandals. “I therefore once again call on the Fed to further limit the ability of Wells Fargo to continue to harm its consumers and undermine the security and integrity of our banking system.”
““Continuing to allow this giant, culturally broken bank to operate in its current form poses substantial risks to consumers and the financial system.”“
Warren also called for a change in leadership at Wells Fargo and for the creation of teams to monitor its sales practices and risks.
“The Fed has the power to put consumers first and it has to use it,” Warren said. “By invoking its full authority to protect consumers and the financial system and requiring Wells Fargo to separate its consumer banking arm from the rest of its financial operations, the Fed can ensure that Wells Fargo faces the appropriate consequences of its ungovernable behavior. for a long time. “
Wells Fargo WFC,
did not specifically comment on Warren’s letter, but released a statement Tuesday saying he is committed to serving customers with “the highest standards.”
“We are a different bank today than we were five years ago because we have made significant progress,” the bank said.
Wells Fargo has been fined more than $ 5 billion in recent years over a series of scandals that have hurt customers.
But just last week, Wells Fargo was fined an additional $ 250 million for failing to correct years-old practices it agreed to correct under a 2018 consent order from regulators. – although Wall Street largely ignored it.
“Every day that Wells Fargo continues to operate these deposit accounts is a day that millions of customers remain at risk of further negligence and willful fraud,” she said. “The only way to protect these consumers and their bank accounts is through another institution – one whose business model doesn’t depend on scamming customers for every penny they can get.”
The prospect of a Fed break-up of Wells Fargo is slim, but the bank will likely face more pressure from the Biden administration, especially if Biden chooses more liberal candidates for the board of directors of the Biden. Federal Reserve in the coming year.
Wells Fargo shares edged up on Tuesday and are up 53% year-to-date, relative to the S&P 500’s SPX,
18% gain this year.
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